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The Relationship Between Working Capital Management and Profitability of Construction Firms in Malaysia

Al-Mawsheki, Randa Mohammed Shams Addin (2014) The Relationship Between Working Capital Management and Profitability of Construction Firms in Malaysia. Masters thesis, Universiti Utara Malaysia.

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Abstract

Working capital management has an important role to play in the firms’ profitability. This study, the relationship between working capital management and profitability of construction firms in Malaysia, investigates the effect of working capital management on profitability of construction firms in Malaysia for a period of time between 2002 and 2012. In order to do that, this study uses a balanced panel data of thirty construction firms that are on the list of Kuala Lumpur Stock Exchange. The results of the study show that cash conversion cycle, which is used as a proxy of working capital management, along with its components, receivable collection period and payable collection period are significantly negative having an effect on the firms’ profitability. However, the results show that the inventory collection period has a negative insignificant effect on the profitability. Additionally, there is a significant impact for the financial leverage, sales growth and firm size on the profitability of firms as well. The study comes to conclusion that the construction firms in Malaysia can develop their profitability by decreasing the inventory conversion period, cash conversion cycle, receivable collection period and payable collection period. The study comes to another conclusion and that is construction firms are required to focus and develop their collection and payment policy. The influential policies have to be formulated for the individual components of working capital. Moreover, the construction firms’ profitability can be increased by efficient management and financing of working capital (current assets and current liabilities).

Item Type: Thesis (Masters)
Subjects: H Social Sciences > HG Finance
Divisions: Othman Yeop Abdullah Graduate School of Business
Depositing User: Mr. Badrulsaman Hamid
Date Deposited: 03 Sep 2014 00:44
Last Modified: 14 Apr 2016 02:42
URI: http://etd.uum.edu.my/id/eprint/4043

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